City councils which try to contain the size of cities through strictly applied urban limits are undermining housing affordability at a time when an increasing number of people cannot afford to buy homes, and rents are rising steeply.
BUSINESSDESK: City councils which try to contain the size of cities through strictly applied urban limits are undermining housing affordability at a time when an increasing number of people cannot afford to buy homes, and rents are rising steeply.
In its final report on housing affordability, released today, the government-appointed Productivity Commission is especially critical of the Auckland Council’s proposed “compact city” approach, saying it “undermines the aspiration of affordable housing.”
That’s despite the revised Auckland Plan proposing that 30% to 40% of all new housing in the city will be built on so-called “greenfields” development land, which has not previously been developed.
“An immediate release of land for residential development would ease supply constraints and reduce the pressure on prices” by releasing a combination of “brownfields” land, which has already been developed but is outside the Metropolitan Urban Limit (MUL) and “greenfields”, the commission said.
It challenges the Auckland Council to “show in its final Auckland Plan how it has considered and reconciled affordable housing with its other priorities”.
It says “Christchurch Council should also increase the supply of land and councils in other high growth centres should explore the options for doing so, suggesting “a shift in philosophy may be called for”.
It also suggests a shift in mindset about urban limits could help, based on “zoning areas from which development is to be excluded and then allowing market forces to determine appropriate land uses on the balance, subject to complying with environmental standards, with councils using their infrastructure planning as a means to signal where development will take place and under what timeframe”.
However, the chairman of the Hobsonville Land Company, Chris Aiken, told BusinessDesk that land availability risked being overstated as a cause of escalating housing prices.
Welcoming the commission’s report, he said bare land contributed perhaps $30,000 of the cost of a $600,000 home, and that New Zealanders’ desire for large homes and sections by international standards were part of the issue, along with the costs of regulation, and construction materials.
“We’re used to bigger servings than we can afford now,” he said, with New Zealand among the top three countries for expected house size, at 200 square metres-plus, along with Australia and the United States.
He questioned whether additional infrastructure costs required to open up new residential land would save money across the economy as a whole.
The commission’s conclusions on land availability look likely to spark the greatest controversy, with the Green Party immediately slamming the plan as a recipe for urban sprawl and reduced productivity, and motorway congestion.
“The Productivity Commission’s plan will condemn people to spending large amounts of their time sitting in traffic, spending money on fuel,” Greens co-leader Russel Norman said.
However, its recommendations range more widely to take in the slowness and complexity of releasing new residential land for development, the comparatively high cost of construction materials in the small New Zealand market, the cost and time required for regulatory approvals, and the fragmented nature of the building industry.
It also seriously questions the thrust of current state housing policy, which seeks to move tenants into other accommodation when their circumstances improve or family size changes, arguing there are wider social benefits from keeping communities intact.
On the local building industry, the commission said some 4604 individual firms were responsible for building just one home each in the year to May 2010, while just 30 firms built more than 30 homes, and five much larger firms were responsible for more than 100 homes each in that year.
It found also that it could take between two and 10 years to jump through the various regulatory hurdles created by the interplay between council plans, the Resource Management Act, the Local Government Act and the Land Transport Management Act, all of which operated to different criteria and timetables.
“The government should consider the case for reviewing planning-related legislation,” the report said.
Levies on developers to fund infrastructure for new subdivisions were inconsistent, often a major source of additional cost, and could benefit from a review of best practice for implementation nationwide.
It also found problems with current building controls, and expressed concern that recent reforms may not assist, saying there was evidence innovation and efficiency were being blocked by the current approach.
Building consent authorities were also very risk-averse because of fears they could find themselves liable for repairs on inadequate construction work.
The commission recommends the Law Commission take this into account in its review of the legal concept of “joint and several liability”.
